Innospan Corp v. Intuit et al, No. 3:2010cv04422 - Document 73 (N.D. Cal. 2010)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS by Judge Alsup granting in part and denying in part 19 Motion to Dismiss; granting in part and denying in part 21 Motion to Dismiss (whalc1, COURT STAFF) (Filed on 12/3/2010)
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Innospan Corp v. Intuit et al Doc. 73 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 INNOSPAN CORP., 11 For the Northern District of California United States District Court 10 12 13 No. C 10-04422 WHA Plaintiff, v. 14 INTUIT, INC., MINT SOFTWARE, INC., SHASTA VENTURES GP, LLC, and DOES 1–20, 15 ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS Defendants. / 16 17 18 INTRODUCTION In this trademark infringement action, defendants move to dismiss all claims made by 19 plaintiff. For the reasons stated below, the motions to dismiss are GRANTED IN PART AND 20 DENIED IN PART. 21 STATEMENT 22 Plaintiff Innospan Corporation and its related companies have been using the mark 23 “mint” continuously since July 2005. These companies have done business in the fields of high 24 speed Internet solution, IT consulting service, movable printer sales and service, and social 25 networking (Compl. ¶ 1). In the early months of 2006, defendant Shasta Ventures GP, LLC, 26 considered investing in Innospan, and Innospan sent Shasta several business plans displaying 27 the Innospan mint mark. Shasta declined to invest in Innospan in or about May 2006, and about 28 a year later, Shasta invested in defendant Mint Software, Inc. (Compl. ¶ 21). Innospan alleges Dockets.Justia.com 1 that Shasta stole the “mint” name and mark and gave them to defendant Mint Software, making 2 Mint Software a more valuable acquisition target for defendant Intuit, Inc. Intuit purchased 3 Mint in 2009 for $171 million (Compl. ¶ 27). 4 Defendants Intuit and Mint Software are in the business of providing free online 5 personal financial services, and they have used several different mint marks in connection with 6 this business between 2006 and 2010. Due to Mint and Intuit’s use of these marks, Innospan 7 alleges that it suffered losses stemming from actual confusion by its potential customers and 8 business partners (Compl. ¶ 51). the Santa Clara County Superior Court, reciting seven causes of action: (1) conversion (against 11 For the Northern District of California On September 22, 2010, plaintiff filed its first amended complaint against defendants in 10 United States District Court 9 Intuit, Mint Software, and Shasta Ventures); (2) infringement of unregistered mark (against 12 Intuit and Mint Software); (3) common law misappropriation and unfair competition (against 13 Intuit and Mint Software); (4) state and common law misappropriation and unfair competition 14 (against Shasta); (5) state statutory unfair competition (against, Intuit, Mint Software, and 15 Shasta); (6) declaratory relief (against Intuit and Mint); and (7) unjust enrichment (against Mint 16 Software and Shasta). Shasta, Intuit, and Mint Software removed the action to federal court and 17 brought the instant motions to dismiss. 18 On October 27 Innospan also filed an ex parte application for a temporary restraining 19 order. Defendants filed an opposition to that motion that is addressed in a companion order. A 20 hearing for all of these motions was held on December 2, 2010. 21 ANALYSIS STANDARD OF REVIEW 22 1. 23 To survive a motion to dismiss for failure to state a claim, a pleading must contain 24 sufficient factual matter, accepted as true, to state a claim that is plausible on its face. FRCP 25 12(b)(6); Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009). A claim is facially 26 plausible when there are sufficient factual allegations to draw a reasonable inference that 27 defendants are liable for the misconduct alleged. While a court “must take all of the factual 28 allegations in the complaint as true,” it is “not bound to accept as true a legal conclusion 2 1 couched as a factual allegation.” Id. at 1949-50. “[C]onclusory allegations of law and 2 unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a 3 claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996). Dismissal without 4 leave to amend is only appropriate when the Court is satisfied that the deficiencies in the 5 complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 6 (9th Cir. 2003) (citation omitted). With these legal standards set forth, this order turns to the 7 seven claims in the complaint. 8 2. 9 The elements of a conversion claim under California law are as follows: 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 CONVERSION A conversion occurs where the defendant wrongfully exercises dominion over the property of another. Greka Integrated, Inc. v. Lowrey, 133 Cal. App. 4th 1572, 35 Cal.Rptr. 3d 684, 691 (Ct. App. 2005) (citing Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 61 Cal.Rptr.2d 707, 709 (Ct. App. 1997)). To establish conversion, a plaintiff must show (1) his ownership of or right to possess the property at the time of the conversion, (2) that the defendant disposed of the plaintiff’s property rights or converted the property by a wrongful act, and (3) damages. Messerall v. Fulwider, 199 Cal. App. 3d 1324, 245 Cal. Rptr. 548, 550 (Cal. Ct. App. 1988) (citing Baldwin, 145 Cal.Rptr. at 416). A plaintiff in a conversion action must also prove that it did not consent to the defendant's exercise of dominion. Bank of New York v. Fremont Gen. Corp., 523 F.3d 902, 914 (9th Cir. 2008). 18 Plaintiff alleges that defendants converted the mint name and mark without permission, 19 sufficiently pleading all three elements under California law. Defendants argue, however, that 20 under California law the tort of conversion does not extend to trademarks. In Kremen v. Cohen, 21 the Ninth Circuit decided that intangible property could be converted. 337 F.3d 1024, 1030 (9th 22 Cir. 2003). That decision, however, has yet to be applied to intangible intellectual property 23 rights in a trademark within the Ninth Circuit. In Meeker v. Meeker, Judge White analyzed the 24 decision in Kremen and decided not to extend the tort of conversion “to reach the intangible 25 intellectual property rights in a trademark.” No. 02-00741, WL 2554452, at *6 (N.D.Cal. Nov. 26 10, 2004). The same conclusion was reached by Judge Wilken in Tethys Bioscience, Inc. v. 27 Mintz, et al., “although Kremen recognized that intangible property could be converted, 28 subsequent California cases addressing the application of the conversion tort to intangible 3 1 property have suggested that this theory should not be expanded to ‘displace other, more 2 suitable law’.” No. 09-5115, WL 2287474, at *7 (N.D.Cal. June 4, 2010). This order concurs. 3 Plaintiff’s complaint also alleges a claim for trade infringement under the Lanham Act. That 4 claim is the appropriate legal avenue for trademark infringement, not conversion. Defendants’ 5 motions to dismiss this claim are GRANTED. 6 3. TRADE INFRINGEMENT 7 “To prevail on its claim of trademark infringement, [Plaintiff] must prove: (1) that it has 8 a protectible [sic] ownership interest in the mark; and (2) that the defendants’ use of the mark is 9 likely to cause consumer confusion, thereby infringing upon the State’s rights to the mark.” Dep’t of Parks & Recreation for State of Cal. v. Bazaar del Mundo Inc., 448 F.3d 1118, 1124 11 For the Northern District of California United States District Court 10 (9th Cir.2006) (citing Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1354 (9th Cir.1985) 12 (en banc)). Plaintiff argues that it has sufficiently pled the elements required under the Lanham 13 Act for trademark infringement. This order agrees. 14 As to the first element, “to acquire ownership of a trademark it is not enough to have 15 invented the mark first or even to have registered it first; the party claiming ownership must 16 have been the first to actually use the mark in the sale of goods or services.” Sengoku Works 17 Ltd. v. RMC Int’l, Ltd., 96 F.3d 1217, 1219, as modified, 97 F.3d 1460 (9th Cir. 1996). Here, 18 plaintiff alleges both the invention of the mint mark as well as its original use in the sale of 19 goods or services in 2005. Defendants do not refute these facts. 20 In regard to the second element, likelihood of confusion, the Ninth Circuit set forth an 21 eight-factor test in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir.1979): “1. 22 strength of the mark; 2. proximity of the goods; 3. similarity of the marks; 4. evidence of actual 23 confusion; 5. marketing channels used; 6. type of goods and the degree of care likely to be 24 exercised by the purchaser; 7. defendant's intent in selecting the mark; and 8. likelihood of 25 expansion of the product lines.” The Ninth Circuit has also noted, however, that whether there 26 is a likelihood of confusion between two competing marks is a question of fact. Quiksilver, Inc. 27 v. Kymsta Corp., 466 F.3d 749, 759 (9th Cir. 2006). 28 4 1 In the instant action, the plaintiff has sufficiently pled that a likelihood of confusion is 2 plausible between the original mint mark and the marks used by defendants Intuit and Mint 3 Software. Plaintiff is engaged in a variety of technology-based businesses on the internet, 4 similar, if not related to the technology business run by defendants, and alleges confusion 5 among its customers between the two marks. Moreover, the complaint also describes the 6 strength of the mark, similarity of the marks, and several other factors that would be considered 7 under the Sleekcraft test. The plaintiff, however, does not have to establish at this stage that 8 confusion exists, merely that confusion is plausible based on the allegations in the complaint. 9 Indeed, whether there is a likelihood of confusion between two competing marks is a question of fact that is to be addressed at trial or in a motion for summary judgment. Defendants’ 11 For the Northern District of California United States District Court 10 motions to dismiss the claim of trade infringement are DENIED. 12 4. UNFAIR COMPETITION AND MISAPPROPRIATION 13 Plaintiff’s next claim is for unfair competition and misappropriation. Common law 14 misappropriation is simply a subset of unfair competition. Bank of the W. v. Sup. Ct., 2 Cal.4th 15 1254, 1263 (1992). Defendants argue that controlling Ninth Circuit authority dictates that the 16 tort of misappropriation does not extend to cover trademarks. In Toho Co. v. Sears, Roebuck & 17 Co., the Ninth Circuit addressed this issue and decided that California courts would refuse to 18 extend the misappropriation tort to cases where the plaintiff solely alleged trademark 19 infringement. 645 F.2d 788, 794 (9th Cir. 1981). Our own Judge Chen, however, has 20 subsequently revisited that question in light of decisions by California courts and found that 21 misappropriation has been extended to cover trademarks. In Garcia v. Coleman, Judge Chen 22 decided that, “although the Ninth Circuit's decision in Toho supports defendants’ position, the 23 California courts have held there is in fact a claim for misappropriation for a trade name so long 24 as there is some likelihood of confusion.” No. 07-2279, WL 4166854 at *15 (N.D. Cal. Sept. 8, 25 2008). Thus, California common law does afford protection even if the protected interests are 26 akin to those protected by trademark law. Id. at *16. 27 28 5 1 In the instant action, as discussed above, plaintiff has sufficiently pled a likelihood of 2 confusion. Therefore, similar to plaintiff’s claim for trade infringement, plaintiff’s claims for 3 unfair competition and misappropriation hinge on questions of fact, not law. Defendants argue, 4 however, that plaintiff’s claims are time-barred because the statute of limitations has expired. 5 California Code of Civil Procedure Section 339 sets forth a two-year statute of limitations. 6 Plaintiff’s complaint alleged that defendants misappropriated the mint mark in 2007, and so 7 defendants argue that the two-year statute of limitations expired in 2009. Plaintiff’s complaint 8 also alleged, however, that defendants concealed facts from plaintiff, including the alleged 9 disclosure of the mint mark by Shasta to Mint Software, preventing the discovery of the misappropriation. Such behavior tolls the applicable statute until the plaintiff discovers or 11 For the Northern District of California United States District Court 10 ought to have discovered those facts. Hernandez v. Garcetti, 68 Cal. App. 4th 675, 680–81 12 (1998). Plaintiff asserts that because of the concealment by defendants, the misappropriation 13 was not discovered until 2010. This issue must be tried. Defendants’ motions to dismiss these 14 claims are DENIED. 15 Plaintiff requests to withdraw its common law unfair competition claim against 16 defendant Shasta because this claim requires a likelihood of confusion and Shasta is not using 17 the mint mark. Similarly, defendant Shasta argues that misappropriation, as a subset of unfair 18 competition, requires a likelihood of confusion as well and none exists. Therefore, both 19 plaintiff’s request to withdraw its unfair competition claim against Shasta and defendant 20 Shasta’s motion to dismiss the claim of misappropriation are GRANTED. 21 5. CLAIMS FOR VIOLATION OF CALIFORNIA LAW 22 As acknowledged by both parties, the success of Innospan’s state law claims under 23 California Business and Professional Code 17200 is based on the same conduct and arguments 24 for plaintiff’s federal claims. To the extent this order finds that Innospan properly states federal 25 claims for unfair competition and misappropriation, Innospan’s state law claims for unfair 26 business practices are also not dismissed. Defendants’ motions to dismiss Innospan’s state law 27 claims are DENIED. 28 6 1 6. DECLARATORY RELIEF 2 Plaintiff’s sixth claim seeks declaratory relief. Until this case is finally determined, it is 3 impossible to say that declaratory relief will not be in order. Defendants’ motions to dismiss 4 plaintiff’s claim for declaratory relief are DENIED. 5 7. UNJUST ENRICHMENT 6 Defendants make the argument that there is no cause of action for unjust enrichment in 7 California. This is true. Indeed, unjust enrichment is “not a cause of action . . . or even a 8 remedy, but rather a general principle, underlying various legal doctrines and remedies. It is 9 synonymous with restitution.” McBride v. Boughton, 123 Cal. App. 4th 379, 387 (2004). As such, a claim for unjust enrichment is properly pled as a claim for a contract implied-in-law. It 11 For the Northern District of California United States District Court 10 “does not lie when an enforceable, binding agreement exists defining the rights of the parties.” 12 Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996). California, 13 however, recognizes an exception to the rule that unjust enrichment does not lie when an 14 enforceable contract exists: “Restitution may be awarded in lieu of breach of contract damages 15 when the parties had an express contract, but it was procured by fraud or is unenforceable or 16 ineffective for some reason.” McBride, 123 Cal. App. 4th at 388. 17 Given this backdrop, to properly state a claim, Innospan would have had to either allege 18 that the parties’ rights were not squarely set out in a binding agreement, or allege that any 19 express contract was procured by fraud or was ineffective for some reason. Since Innospan 20 failed to properly state a claim for unjust enrichment under these standards, defendants’ motions 21 to dismiss Innospan’s seventh claim must be GRANTED. 22 CONCLUSION 23 For the foregoing reasons, the motions to dismiss are hereby GRANTED IN PART and 24 DENIED IN PART. Specifically, the motions are GRANTED as to plaintiff’s claims for conversion 25 against all defendants, for unfair competition and misappropriation against Shasta, and for 26 unjust enrichment against Shasta and Mint Software. The motions are DENIED for all other 27 claims. Innospan may file a motion seeking leave to amend their counterclaims — attaching the 28 7 1 amended pleading thereto — BY NOON ON THURSDAY, DECEMBER 16, 2010, explaining why 2 the amended claims properly state claims for relief 3 Finally, the Court is unwilling to convert the motions to dismiss to motions for summary 4 judgment as defendants suggested in their reply brief. If defendants feel so strongly that 5 plaintiff’s case is hopeless they should file a proper motion for summary judgment at the 6 appropriate time. Plaintiff will have to oppose it and provide a Rule 56 affidavit, and the Court 7 will consider, at that time, whether to allow discovery on the Rule 56 motion. 8 9 IT IS SO ORDERED. 11 For the Northern District of California United States District Court 10 Dated: December 3, 2010. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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